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7 Mar 2014
Flash: US employment in perspective - Societe Generale
FXStreet (Guatemala) - Kit Juckes, Global Head of Currency Strategy at Societe Generale explained that, by and large, today's US employment report was a 'business as usual' sort of a report but added that MUCH more important, is what is happening on wages.
Key Quotes
"It is still weather-distorted though slightly milder weather suggests next month's numbers will be cleaner and my guess of the consensus forecast is that it will be around 200k or so at least."
"My take while I wait for the wisdom of Aneta and Brian is 1) employment growth of 1.6% y/y in payrolls is in line with trend and 'OK', though the household survey shows a 0.8% y/y increase in employment and that will need digging into when the weather clears. A soft household number also explains the tick higher in the unemployment rate."
"2) MUCH more important, is what is happening on wages"
"The headline series from the BLS only dates back to 2007, and shows average hourly earnings growth, for all employees. The 'old' series is for production and non-supervisory workers and nerdy economists use it because if we want to look at Phillips Curves etc we need a longer time series."
"Anyway, the headline series is at 2.2% y/y and the 6-month average is going sideways at 2.1. No big deal."
"But the old series is up at 2.5% and trending higher. Given the uncertainty there is about how much slack is left in the US labour market, this should be ringing alarm bells all over the place."
"I am as happy to believe in a 'new' labour market where workers have no bargaining power, as anyone. But today's wage data are important."
"3) Market implications: Puts a floor under US rate expectations and probably under inflation expectations. Anything that gives the impression the Fed is letting wage growth pick up too fast will scare people."
'It's not strong enough to really spook the Treasury market yet so the range holds easily enough, and as such, this is going to be yen-negative rather than EM-negative for now, but keep on that for the longer run. And it's another support for the longer-term idea of being short Tsies vs Gitls and short GBP/USD. EUR/USD and the ECB are holding the euro up and GBP/USD with it, but the contrast between US and UK wage trends is striking (unless UK av earnings follow the US trend sharpish, obvs)."
Key Quotes
"It is still weather-distorted though slightly milder weather suggests next month's numbers will be cleaner and my guess of the consensus forecast is that it will be around 200k or so at least."
"My take while I wait for the wisdom of Aneta and Brian is 1) employment growth of 1.6% y/y in payrolls is in line with trend and 'OK', though the household survey shows a 0.8% y/y increase in employment and that will need digging into when the weather clears. A soft household number also explains the tick higher in the unemployment rate."
"2) MUCH more important, is what is happening on wages"
"The headline series from the BLS only dates back to 2007, and shows average hourly earnings growth, for all employees. The 'old' series is for production and non-supervisory workers and nerdy economists use it because if we want to look at Phillips Curves etc we need a longer time series."
"Anyway, the headline series is at 2.2% y/y and the 6-month average is going sideways at 2.1. No big deal."
"But the old series is up at 2.5% and trending higher. Given the uncertainty there is about how much slack is left in the US labour market, this should be ringing alarm bells all over the place."
"I am as happy to believe in a 'new' labour market where workers have no bargaining power, as anyone. But today's wage data are important."
"3) Market implications: Puts a floor under US rate expectations and probably under inflation expectations. Anything that gives the impression the Fed is letting wage growth pick up too fast will scare people."
'It's not strong enough to really spook the Treasury market yet so the range holds easily enough, and as such, this is going to be yen-negative rather than EM-negative for now, but keep on that for the longer run. And it's another support for the longer-term idea of being short Tsies vs Gitls and short GBP/USD. EUR/USD and the ECB are holding the euro up and GBP/USD with it, but the contrast between US and UK wage trends is striking (unless UK av earnings follow the US trend sharpish, obvs)."